Disney made progress toward direct-to-consumer profitability in the last quarter. Another Disney+ price increase and password-sharing curbs could finish the job on schedule in 2024. But at what cost?
Top news stories (1:00)
Disney’s Q3 (Fiscal) 2023 performance (9:45)
Disney says it will increase the price of Disney+ ad-free viewing. The price will rise from $10.99 monthly to $13.99, though those watching ads will continue to pay the same, $7.99 monthly. The direct-to-consumer business lost $0.5 billion in the quarter, about half what it did in Q3 (fiscal) 2022. As it has forecast, the company seems on course to reach profitability for D2C in 2024.
Why the Disney+ fee increase will generate more churn than before (14:45)
The $3 increase means ad-free viewers have seen the cost of the service increase by 75% in the last year. I explain why such a steep increase is not justified from a consumer perspective and could result in a large increase in subscriber churn.
Why Disney had no choice but to raise prices again (19:50)
Bob Iger is under much pressure to achieve D2C profitability and has few levers to pull to get there. Raising prices, though it could result in more substantial subscriber losses, is realistically a must to keep investors in the company happy.
Disney’s revenue priorities (21:30)
Bob Iger laid out the three revenue priorities for Disney:
- The studios
- The Theme Parks
- Direct-to-consumer streaming
Traditional TV revenue was down by 7%, and D2C revenue was up by 9% in Q3. If that performance is repeated in Q3 2024, D2C will generate as much revenue as traditional TV. It is certainly not good business for Disney to replace revenue generating a profit with revenue made at a loss.
An update on ESPN moving to D2C (24:20)
Disney is looking for partners that can help launch ESPN as a direct-to-consumer service. I wondered why they aren’t rolling it into ESPN+. We discuss some of the reasons the company might be doing that. We also discuss the recent announcement that ESPN is partnering with PENN Entertainment on betting.
Hulu’s vMVPD losing ground to YouTube TV (28:20)
In the last quarter, Hulu Live, Disney’s vMVPD, lost 100,000 subscribers. Sling TV also lost subscribers in the quarter. Each has lost ground to YouTube TV, which is estimated to have 6.6 million subscribers and is beginning to dominate the category.
